Friday, April 29, 2016

CVS Q1 2016 Monthly Report

CVS opened the year on 1/4/16 at $96.06 and closed out the quarter on 3/31/2016 at a price of $103.73, representing a 7.98% gain. With a price target of $126.47, 24.72% upside still remains. Since buying in at $91.66, CVS has provided us with captain gains yield of 12.76%. On 1/20/2016 a 0.425 dividend was paid out.  

CVS has a P/E ratio of 19.8 as of 3/31/2016, which is in line with the S&P 500 average.  One key multiple that shows CVS is undervalued compared to its peers is their P/S ratio. CVS has a P/S ratio of 0.62 as of 3/31/2016 compared to the S&P 500 average of 1.7. With expected revenue growth of 10% supported by recent acquisitions of Target pharmacies, CVS is putting itself in a phenomenal position to be successful.

CVS reported fourth quarter earnings on February 9th 2016. CVS reported strong fourth quarter profit growth with an adequate end to a phenomenal year-end 2015. CVS is continuing to grow through the acquisitions of Target pharmacies and Omnicare, a leader in long-term care pharmacy. The integration activities with target are under way and already stores have been transformed. Conversions in the next quarter will continue to increase and should be completed by the end of FY 2016. 

With conversions to be completed by the end of FY 2017, there is huge potential for an increase in the revenue stream once the new CVS pharmacies within target see the market. CVS is a great long-term value stock that I believe will continue be the backbone of our healthcare holdings. 

Thursday, April 14, 2016

BAC Q1 2016

BAC Q1 2016

Bank of America reported first quarter earnings of $0.21 on April 14, which beat analyst estimates of $0.20. However, they reported revenue of $19.7B (-8.0% Y/Y), missing estimates by $600M. Although they missed on revenue the stock closed up 2.5% on the day.
BAC saw an increase in Net Interest Income, but saw a decrease in non interest income because capital markets and other related activities. Banking sources of non interest income were performing well. Loans are growing across the bank. Cost went down 3%, and the costs are expected to continue to go down.  Credit quality is strong in the quarter, besides those for the energy sector. Although provisions for credit losses related to the energy loans, BAC made adjustments to lower energy exposure because of the low energy prices, and the volatility. The efficiency ratio improved to 73% compared to the 77% in Q1 2015.  The possibility of increased interest rates sometime toward the end of the year will only increase NII for BAC. They are not performing at a spectacular level, it is nothing people should be worried about, which is why I believe we saw an increase in price today. BAC is still very cheap.

Wednesday, January 20, 2016

BAC Q4 earnings

Bank of America Corporation reported fourth quarter earnings per share of $0.28, beating the street estimates of $0.26 on January 19th. They reported revenue of $19.53B, which is a 4.3% increase Y/Y. However, the revenue missed estimates by $250M. The stock initially had a positive reaction, but since then the market sell off has affected the price. Although some analyst say BACs expenses remain too high, they are headed in the right direction, finally being able to move past most of their legal problems from the recession. The company is becoming more efficient, improving their efficiency ratio from 88% in 2014 to 68% in 2015. As they lower their expenses it will improve further.
The bank makes most of its money from net interest income and non-interest income. We saw net interest income grow in Q4 2015 to $10.5B from $10.3B in Q3 2015, and $10.4B Q4 2014. Non-interest income was also up to $9.7B, a 7% increase Y/Y. As for consumer benefits, CEO Brian Moynihan says spending on credit and debit cards rose 4% Y/Y, but without the oil decline, it would have risen 5.7%. Putting a dollar number on it, that's $20M per day in savings to the bank's credit and debit card customers.

With interest rates rising, that can only help the NII, and the largest banks will see some gains. BAC saw their best year for earnings since the Great Recession.

Sunday, January 17, 2016

Citigroup Beats Estimates for Fourth Consecutive Quarter; Stock Falls on Global Uncertainty

Citigroup posted a fourth quarter earnings per share (excluding impact of CVA/DVA) of $1.06 beating consensus estimates of $1.05, on January 15th.  This EPS disclosure represents just below a 17-fold increase from Q4 2014, when the company posted a $0.06 EPS, due mainly to absorbing legal and repositioning costs. This marks the fourth consecutive quarter that Citigroup surpassed EPS estimates. Citi posted top-line revenue of 18.64 billion for Q4 2015, surpassing estimates of $17.87 billion. 2015 saw annual earnings per share of $5.35.

Broken down, Citi saw Investment Banking and Fixed-Income, Currencies & Commodities revenues exceed expectations for Q4, whereas Equity revenue missed estimates by $165 million.  With the closing of their fiscal year Citi saw their annual net income amount to $17.1 billion. This not only represents more than a 130% increase YoY, but also marks the highest annual net income for Citi since 2006. Citi’s expenses as a percentage of revenue decreased to 57% for 2015 from 65% in 2014. This stems from Citi’s devotion to cutting unnecessary costs and repositioning itself to better suit its environment, along with the continued uptick of the US economy following the 2007 Housing Crisis.

Although the disclosure was almost all positive the share price tumbled 7% on the day to $42.47 at the week’s closing. This comes on the back of news relating to the uncertainty of the Chinese markets and the lowest oil prices seen since 2003. Citi is very exposed to China, asset-wise, causing shareholders to weigh the positive earnings news with the current global landscape. Citi was not the only victim of the current market situation, as the Dow, NASDAQ, and S&P all finished firmly in the red on Friday.

It looks as though Citi is in a good financial situation, moving forward into 2016. They are repositioned and look primed to increase revenues again next year. The stock continues to be very undervalued, currently at $42.47/share, compared to its end-of-the-year book value of $69.46 and tangible book value of $60.61. Hopefully, 2016 sees an end to the instability in the Chinese and oil markets, and an increase in revenues due to hiked interest rates. Regardless, we must keep a close eye on the situation as the stock is down almost 12% since January 1st, 2016.

Saturday, January 16, 2016

PNC Closes 2015 Out Strong; China & Oil Weigh on Markets

PNC posted diluted earnings per share of $1.87 which surpassed Street estimates of $1.80. This represents an earnings surprise of 3.9% and growth of 1.6% from the same quarter in the prior year. Results were mainly driven by lower expenses, which unfortunately were offset by lower revenues and higher provisions for credit losses and net charge offs. Despite the positive report, the results were masked by worries in China and oil with each of the main indices down at least 3% in intraday trading. PNC closed the week at $86.36.

Revenue for the quarter came in at $3.85 billion which was down 2.4% from the prior year. The decline was mostly due to a fall in non-interest income but the figure still beat on consensus revenue estimates. Net income in the Retail Banking, Asset Management Group and Non-Strategic Assets Portfolio increased 23.8%, 13.3%, and 23.3%, respectively, from the prior year’s quarter. Net income in the Corporate & Institutional Banking and Other segments declined 4.4% and 33%, respectively.

Net interest income for the quarter was down 0.2% year over year due to lower purchase accounting accretion, despite an increase in core net interest income. PNC’s net interest margin decreased 19 bps to 2.70%. Net charge offs increased 2% year over year to $120 million and provision for credit losses rose 42% to $74 million.

In the quarter, PNC repurchased 5.8 million common shares for $0.5 billion. As of December 31st Basel III common equity tier 1 ratio was 10.7%. Total assets were $358.5 billion, up 3.9% year over year. Total loans and total deposits increased 0.9% and 7.2%, respectively.

Sunday, November 22, 2015

Spectrum Brands Holdings Q4 2015 Earnings

Spectrum Brands Holdings (SPB) reported its Q4 2015 earnings on Thursday, November 22, 2015. The company reported Q4 EPS of $1.13, $0.04 worse than the analyst estimate of $1.17. Revenue for the quarter came in at $1.31 billion versus the consensus estimate of $1.33 billion. Although the company missed on both top and bottom line, the stock reacted positively to strong updated company guidance for FY 2016. Before the company released earnings the stock was priced at $92.45 per share but then rose approximately 4% to $96.18 post earnings. Spectrum Brands expects fiscal 2016 net sales, as reported, to increase in the high-single digit range compared to fiscal 2015 reported net sales of $4.69 billion. Fiscal 2016 free cash flow is projected to be approximately $505-$515 million compared to $454 million in fiscal 2015. Capital expenditures, which were $89.1 million in fiscal 2015, are expected to be in the rage of $110 million to $120 million. I believe the company’s strong updated guidance including expected growth in sales and increase in capital expenditures will provide expansion, and support of technology innovation for the company which could definitely create an increase in value of the stock in the future. 

Saturday, November 14, 2015

ORCL 11/15

ORCL began trading the month of November at $39.05, and then reached a three month high on November 6th trading at $40.64. ORCL closed on November the 13th trading at $37.30 representing a 4.5% decrease for the month of November thus far. Additionally, this represents an 11.7% decline off of our purchase price of $42.25. This is close to where ORCL’s stock price has remained for much of the current quarter. ORCL’s cloud component continues to grow rapidly, however that growth does not appear to be well represented in the stock price. ORCL plans to hire more than 50 engineers in the next 6 months to build up its growing portfolio of Data-as-a-Service offerings. In early November ORCL launched a new cloud data product that can identify age and gender targeting with twice the precision of methods currently available on the market. On November 5th FBR & Co’s Daniel H. Ives downgraded the rating on the company from Outperform to Market Perform, while maintaining the price target at $44. The downgrade was due primarily to ORCL lack of ability to cope with foreign currency headwinds over recent quarters in addition to the lack of M&A expected to maintain ORCL’s new cloud business. However, late last month ORCL executive Larry Ellison alluded to the idea that they were saving cash for a large acquisition in the future. Additionally, ORCL was downgraded at Morgan Stanley which maintains a $45 price target.  

Jeff Sherman